Practice of Severability in Arbitral Disputes
Arbitral Award can be set aside if it suffers from illegalities: Delhi High
Court

In the case of National Highways Authority of India V. Trichy Thanjavur
Expressway Limited, an essential question of severability was raised. The case
dealt with two cross petitions which were later filed under Section 34 of
Arbitration Act before the Delhi High Court. The court exhibit to determine
whether certain parts of the arbitral award can be severed and partially set aside,
and to obtain the desirable result will it affect the Supreme Court’s decision on
NHAI V. M. Hakeem (as per the judgment, Arbitration and Conciliation Act,
1996 is at par with the Model law which does not provide court with the power
of modification of an award).

FINDINGS OF THE COURT

The court observed that Section 34(2)(a)(iv) Of Arbitration Act (The proviso
lays down the rule for setting aside of arbitral award if it doesn’t fall under the
scope of submission under arbitration, though the subject which falls under the
scope of submission under arbitration may sustain on its own), depicts that the
idea of partially setting side of an award is not distinct and is capable of being
severed when it suffers from illegality. Therefore, invoking the power to
partially setting aside the award is statutorily covered under the purview of
‘setting aside’ under Section 34(2).
With reference to the second issue, whether exercising the act of severability
would be against the decision of NHAI V. M. Hakeem, it was held that severing
a decision would not amount to modification when certain part of award is
clearly found to be ‘unsustainable’. The sustainability of the award can be
determined when the claim to be found stand on an independent note and
severing setting aside has not affected the essence of any other part of the
award.
Lastly, the court observed that the principle of severability is solely for the
purpose to identify and remove manifested defects without disrupting the
fundamental nature of the award. Henceforth, The Court held that the award
which suffers from irregularities or illegalities cannot be set aside under Section
34 (2)(a) or (b)of the Act.